Freedom was always your option - The Honest Truth By Ajit Dayal
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Investing in India - Honest Truth by Ajit Dayal
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1 AUGUST 2009


On August 1st, 2009 the Indian mutual fund industry enters a new era.

After years of pushing mostly irrelevant products through a distribution channel that grew fat on the ignorance of investors, the Indian mutual fund industry has been forced to lay bare the facts. From August 1, 2009 all Indian mutual funds will have a cap on what they pay their distributors. And investors can pay their distributors and financial advisors what they believe to be the value of the advice given.

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Over the years, the elephants in the Indian mutual fund industry - and the distributors that made these elephants dance to their tune - have spread a series of questionable "facts".

Each "fact" was in many ways designed to support the immoral practice of letting commissions earned by many distributors determine which mutual funds they recommended. Funds were sold based on the commission structures paid to distributors, not based on which funds were best suited for the investors.

The elephants in the mutual fund were happy to dance along to the tune of many distributors. Every time a fund was sold (or mis-sold) it meant a larger "total assets under management" for the industry - and more fees for the mutual fund house. And better salaries and bonuses for all in the system.

Now, the mutual fund industry is in new territory, not because the giants chose to take the side of the good and right (in fact, they fought it) but because the regulator put a stop to the rot. The days of the symbiotic relationship between the elephants and the distributors are over.

From August 1st the mutual fund industry has to learn to focus on what is good for the investor. A new playing field for those not used to it. So many in the mutual fund industry stand at the gate, nervous and anxious - they don't know what is on the other side. The side that says, "This area reserved for those who are fair and care about their investors".

Welcome to the world of Quantum Mutual Funds
Well, the good news for investors is that Quantum Mutual Funds - the ant of the mutual fund industry - has been standing on the "correct" side of that gate for a long time.
We have been here since 2006.
Not paying commissions to any distributors because we were alarmed at the scope for mis-selling in the industry.
Not because the law told us to be on the "correct" side, but because we were keen to build a business around a "correct" practice.

It has been a lonely existence, talking to investors, explaining to the media why we do what we do.

Quantum Mutual Fund was the 29th Asset Management Company, but the 1st to be clear which side of the gate we were on.
We were the smallest mutual fund house amongst all the dancing elephants, but we had the biggest idea: we were keen to build a piece of heaven here in the troubled world of mutual fund investing.

And what is heaven?
Pretty simple, actually, and within reach.
Quantum Mutual Fund offers investors simple products that can earn a respectable rate of return for the savings of the investors. Across asset classes.

Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)
Quantum Long Term Equity Fund Quantum Gold Fund
(NSE symbol: QGOLDHALF)
Quantum Liquid Fund
Why you
should own
it:
An investment for the future and an opportunity to profit from the long term economic growth in India A hedge against a global financial crisis and an "insurance" for your portfolio Cash in hand for any emergency uses but should get better returns than a savings account in a bank
Suggested allocation 80% 20% Keep aside money to meet your expenses for 6 months to 2 years

Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"


Our investments are based on processes, not on whims and fancies of star fund managers.
We evaluate risk, and shy away from greed.
We focus on the long term and don't watch the TV channels for "tips" or "expert opinions" to guide our investment decisions.

If you wish to double your money, we said in published advertisements three years ago, please do not invest with us.
Yes, we are strange, we speak in plain English.

Our focus is on lowering costs: as more investors like you sign on to our simplicity, our assets will grow - like they have over the past 3 years. We expect that the costs and expenses of operating our mutual funds should be amongst the lowest in the industry. Which means more of your money gets to be invested in the stock markets. Having more of your capital work for you in the stock market is half the battle won.
The other half of the battle is to grow your savings into a long-term pool that you can use in the future is to invest your capital in a sensible way.

The future
So, what will life be like for us after August 1st?
More of the same.

We wake up every morning and head to the office after a good night's sleep. We never had any sleepless nights all these years because we had nothing to feel guilty about.
Neither did we launch popular products that have a limited shelf life for your investment returns.

We have made our share of investment mistakes.
And we hope we have learnt from them by improving the investment process to ensure we don't repeat the same mistakes again.

We like the feel of the grass on this side of the gate where we stand: it feels fresh, clean, and uncomplicated.

And for the past three years we have built a growing community of investors who also like the feel of what we do.

Heaven was always here for you to experience - come, try it for yourself.
Anytime: Before or after August 1st.
This Quantum ant is here to stay.

Note: The Honest Truth is authored by Ajit Dayal. Ajit is a Director at Quantum Advisors Pvt Ltd and Quantum Asset Management Company Pvt Ltd.. Views expressed in this article are entirely those of the author and may not be regarded as views of the Quantum Mutual Fund or Quantum Asset Management Company Private Limited. To write to Ajit, please click here.


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15 Responses to "Freedom was always your option"

Ajit Dayal

Aug 18, 2009

Thank you for all your questions and queries. I am working on my responses and apologise for the delay. The written word is a lot longer than the spoken word - and slower! But there will be an Honest Truth on this. I have framed 10 questions and have completed answers to 4 so far. Please bear with me. Thank you, again, for allowing me the opportunity to explain myself better.

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Gaurav Gupta

Aug 14, 2009

your distribution arm that was criticizing fund of fund for so many years is now associated with your quantum fund of fund. when i wrote to them for an explanation, i was not given a proper response. why is that? are you not required to justify to investors why your opinion has changed suddenly. like people have said before me, instead of talking big, let your actions speak. let me remind you that actions speak louder than words.

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Amit Mohod

Aug 11, 2009

Mr. Dayal,
Compare to others who wrote the views, I am very new to market and investment. For some time I am reading your e-letters and was quite impressed with the contents. But after reading the views of your other readers, I think I am confused. It seems no different than other "Gurus". Will you please answer the concerns raised by other reader(specifically Kartik, Shweta and Ramesh)? This will help the readers like me in great extent.

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Ramesh

Aug 10, 2009

I am with your reader Karthik on this. For long its been a case of mudslinging and name calling from your side. As Indians, we are first to criticise others' actions before we judge our own selves. Let your coloumn not become a story of people living in glass houses throwing stones at others. The "process" that you talk about is pretty much on par with many other AMCs.

If you are really championing the cause of the average retail investor like myself, please also publish the number of investors and what would be the single largest investor holding in your equity fund. Who knows, you could be running a private PMS in the garb of a Mutual fund for a handful of investors, in order to capitalise on the taxation rules on short term cap gains.


And what about your steep exit loads ? was it not one of the steepest before 1st Aug ?

In sum, please highlight your positives, don't build your castle on the foundation of others' dead bodies....

By the way, would like to know what has Quantum done to increase the penetration of MFs in the country either thru the AMC or thru the distribution arm.

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Payal

Aug 10, 2009

Yes I agree with Shweta and Karthik,
with due respects to you sir
1 Although you have been criticising elephant funds you have launched equity FOF, which is inexplicable.
2 Your expense ratio in your equity funds is @ 2.5%, although you save a lot of money by not paying the trail to the distributor. why not give that benefit to the investor ?
3 Criticising and blaming other funds(of which you are also a distributor and now investor through FOF) all the time will not make quantum a better fund. and Quantum should not try to compete with other Funds.
I think the competition is with the other products like Ulips and so called investment products with insurance

I hope you take this in the right spirit and continue with your good work otherwise.

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mdbangard

Aug 7, 2009

no comment

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Karthik

Aug 7, 2009

Dear Sir,
With due respect to your views and abilities of managing investor money on a prudent basis i would like to put forth my opinions on your articles and my dissatisfaction.
1. Your articles give an impression that other fund houses or funds are not as prudent or as good as your funds when it come to managing investor money. This is absurd....As an investor i dont see any reason why they should be projected as players who are not prudent. Other than the fact that you do not involve any middle man by which the cost to a investor may come down i donnt see any reason why you should consider your funds superior. As a matter of fact inspite of the additional cost majority of them have delivered returns better than yours. One cannot comment on the their capabilities.
2. If you believe you are a better fund house in managing money then in the first place you should not have come out with a Fund of Fund that invests in the so call elephant funds. And to add you charge a .75% management fee when you are doing the same that a middle man namely distributor dose( 2.25% is higher to .75% but the returns of their portfolios make up for the same)
3. I would appriciate if you could get in to a positive mode of marketing your fund house by givving us information on what your investment strategies have been under various circumstances rather than getting in to a mud slingging approach which has notting in it to help investors other than forming wrong impressions.

I would like you to consider the above observations in a positive manner. Though your articles are a nice entertaining read with respect to the content on a mature manner i am deeply dissapointed. I expect people of your stature to be more constructive rather than resorting to such practices of always blaming others like they they are sinners.

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Shweta

Aug 3, 2009

Dear Mr. Dayal,

congratulations on a well written article. Quantum mutual fund follows the vanguard approach to sell MFs, but what about your distribution house quantum information services pvt ltd? you are sure on the other side of the gate as an AMC but as a distributor you still are a part of crowd at large. Even your advisory has been baised towards "elephant funds" to concentrate portfolios of the investors. So while you pat yourself for what you are doing as an AMC, you should clarify youself as a distributor as well.

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MKRay

Aug 2, 2009

I am a retird executive ,had invested my hard earned money with your advise from Delhi office and i am incurring still loss.
Your fee structure appeared to me higher than Icici direct.
Your Delhi office has stopped for quite some time to give me any advice in financial management suited to me.

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SAKHEER HUSSAIN

Aug 1, 2009

Dear Sir,

I am not an investor with your organisation, but a reader and a follower. Self-criticism is imperative for an organisation to be dynamic. You are unique in this aspect."Yes boss" culture has damaged the MF industry and lay investors,like me,are seem to be more able to manage money than these blue eyed boys. Go ahead spreading the truth.

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